Filing bankruptcy might be your best option when your consumer debt exceeds your income and repaying it in full would take more than five years. Instead of chipping away at mountains of debt you may never manage to pay off and further damaging your credit score, consider bankruptcy and start diverting funds toward rebuilding your credit score.
What Is Chapter 7 Bankruptcy and What Debts Are Discharged?
A Chapter 7 bankruptcy offers a stress-free way to eliminate debt and get a fresh financial start. It's a powerful debt relief option because it:
- Protects your future wages from creditors
- Provides better access to new lines of credit
- Offers a reaffirmation of secured debts like your home or vehicle
- Bans threatening creditors from pursuing most debt collection actions
When the bankruptcy court grants you a discharge, Chapter 7 bankruptcy eliminates your obligation to pay various unsecured debts like medical bills, personal loans, and credit or debit card debt. You also gain reprieve from paying past-due rent and utility bills, business debts, and civil judgment debts.
Whichever bankruptcy you pursue, your first step should be to invoke a power of attorney. Consulting legal representation is strongly advised because bankruptcy has long-standing financial and legal ramifications, especially when handling sensitive Estate matters such as:
- Estate planning
- Conservatorship or guardianship appointments
- Medical planning and eligibility after filing bankruptcy
- Challenging a will or transfer of estate assets after probate
- A living trust, charitable trust, or a spendthrift trust during the transfer of assets
- Handling of the last will and testament or an advance directive (as a living will) for medical or assets planning
Do I Qualify For Chapter 7 Bankruptcy?
Not everyone is eligible for Chapter 7 bankruptcy. Individuals with a lot of assets may require a probate attorney with vast knowledge in estate planning law to file for Chapter 13 bankruptcy.
You pass the Chapter 7 means test, which looks at your income, assets, and expenses if:
- Your debts total exceeds your annual income by 50%.
- Your total income can't repay creditors or trustee fees.
- You have not received a previous bankruptcy discharge within eight years.
- You've had a Chapter 7, or Chapter 13 bankruptcy petition dismissed voluntarily or due to failure to appear in court or comply with court orders.
Preparing Chapter 7 Bankruptcy: Forms and Costs
Filing Chapter 7 bankruptcy can be a demanding process. When you're not consulting a bankruptcy lawyer, you'll be attending court-mandated bankruptcy courses, counseling classes, and 341 creditors meetings.
Further, there are filing fees to consider, including the time it takes to compile and file financial forms that disclose
- Your monthly income and living expenses
- Prior bankruptcies filed within a period of eight years
- Nonexempt property(s) bankruptcy trustees may sell to pay creditors
- The nature of your business or consumer debt (creditors, assets, and liabilities)
Your Chapter 7 bankruptcy takes effect once the bankruptcy court receives your petition, 341 meeting schedules, and related forms that reveal your complete financial condition. Once you pass the means test and meet all requirements stipulated by the bankruptcy court and trustees, your discharge is granted within 3 to 4 months.
Note: your estate executor can decide the property to be exempt from Chapter 7 bankruptcy, such as your home, furniture, car, and retirement account.
Get Debt Reprieve Of Chapter 7 Bankruptcy
At Law Offices of James C. Shields, we are a team of compassionate and professional lawyers who will guarantee the best possible outcomes thanks to in-depth knowledge in all probate, estate, and debt-relief matters.
We aim to help people who cannot pay their debts and offer reasonable payment plans. Don't wait until debt collectors are at your door. Contact us today for legal representation and advice on the best way to rebuild your credit score.